With the Sensex sneaking a quick look at 20,000 territory, the stock market is expected to carry the momentum, after adopting a cautious stance in the next two sessions, reports Vyas Mohan

With the Sensex sneaking a quick look at 20,000 territory in Monday’s trade, the stock market is expected to carry the momentum, after adopting a cautious stance in the next two sessions ahead of the Reserve Bank of India’s and US Federal Reserve’s meetings to decide on interest rates.

However, what worries market experts is the narrow index rally, which, for the most part, is driven by some heavyweight shares.

“The market is are expected to remain cautious ahead of these two events. What worries us is that there seem to be only four stocks that are driving the index. The Reliance pack was the major driver for many days, and now Larsen & Toubro, BHEL and State Bank of India have joined the party. Laggards are not participating and that is a cause for worry,” said Rahul Nangalia of Nangalia Stock Broking.

On Monday, the benchmark Sensex of the Bombay Stock Exchange closed at 19,977.67 points, up 3.82 per cent, or 734.50 points, after hitting an all-time high of 20,024.87 points during the day’s trade. The broader Nifty of the National Stock Exchange gained 203.6 points, or 3.57 per cent, to end the day at 5,905.90 points.

While the market expects the Reserve Bank of India to keep key rates unchanged in its quarterly monetary policy review scheduled on Tuesday, the US Fed is expected to announce a cut in after its two-day policy meet concluding on Wednesday.

According to technical analysts, though, short-term indicators suggest the market is in the over-bought zone. However, they expect the rally to continue on sheer momentum in heavyweight shares. For the Nifty, they say, 6,000 is not far away.

“Though very near-term indicators show the markets are in overbought zones, higher levels may be attained on the indices as heavyweight shares are trading at all-time highs and are likely to carry on the momentum. The Nifty may face some resistance near 6,000. In case there is a Fed rate cut, the Sensex could zoom to 22,000 in no time,” said Alex Mathew, research head, Geojit Financial Services.

In case of a correction, chartists think the Nifty could find support around 5,650. Nifty November futures closed at a 17.1 point premium to the Nifty index, while Sensex futures closed at a 92.33-point premium to the underlying, indicating optimism.

On Monday, the big guns gave the Sensex a huge lift. While Larsen & Toubro topped the Sensex gainers’ pack, jumping Rs 400.65, or 10.33 per cent, to end the day at Rs 4,277.45, it was followed by HDFC (up by Rs 247.05 or 9.63 per cent at Rs 2813.05) and BHEL (up by Rs 180.35 or 7.42 per cent at Rs 2612.10).